Trust in transition: cross-country and firm evidence
AbstractThis paper uses data from a large survey of firms across 26 transition countries to examine the determinants of trust in the transition process. We first introduce a new measure of trust between firms: the level of prepayment demanded by suppliers from their customers in advance of delivery. Using this new measure, we confirm earlier findings that trust is higher where firms have confidence in third party enforcement through the legal system. However, the fairness and honesty of the courts are more important determinants of inter-firm trust than the courts’ efficiency or ability to enforce decisions. We then examine the role of business networks in building trust and find that networks based around personal ties – family and friends – and business associations actively promote the development of trust, while business networks based on enterprise insiders and government agencies do not. Finally, we find that country-level effects are significantly more important determinants of inter-firm trust than firmlevel effects.
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Bibliographic InfoPaper provided by European Bank for Reconstruction and Development, Office of the Chief Economist in its series Working Papers with number 82.
Length: 22 pages
Date of creation: Oct 2003
Date of revision:
Publication status: Published in M.Raiser, A.Rousso, F.Steves U. Teksoz (2008), Journal of Law, Economics and Organization, 24(2), pp.407-433
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Web page: http://www.ebrd.com/pages/research/publications/workingpapers.shtml
More information through EDIRC
trust; prepayment; courts; business networks;
Other versions of this item:
- Martin Raiser & Alan Rousso & Franklin Steves, 2004. "Trust in Transition: Cross-country and Firm Evidence," Others 0401007, EconWPA.
- Martin Raiser & Alan Rousso & Franklin Steves, 2004. "Trust In Transition: Cross Country And Firm Evidence," William Davidson Institute Working Papers Series 2004-640, William Davidson Institute at the University of Michigan.
- D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
- D92 - Microeconomics - - Intertemporal Choice - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
- P31 - Economic Systems - - Socialist Institutions and Their Transitions - - - Socialist Enterprises and Their Transitions
- Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Social and Economic Stratification
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